Correlation Between First Trust and BlackRock Capital

Can any of the company-specific risk be diversified away by investing in both First Trust and BlackRock Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and BlackRock Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Energy and BlackRock Capital Allocation, you can compare the effects of market volatilities on First Trust and BlackRock Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of BlackRock Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BlackRock Capital.

Diversification Opportunities for First Trust and BlackRock Capital

0.0

Correlation Coefficient

First Trust  BlackRock Capital

Pay attention - limited upside

The 3 months correlation between First and BlackRock is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Energy and BlackRock Capital Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Capital and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Energy are associated (or correlated) with BlackRock Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Capital has no effect on the direction of First Trust i.e., First Trust and BlackRock Capital go up and down completely randomly.

Pair Corralation between First Trust and BlackRock Capital

If you would invest (100.00) in First Trust Energy on November 29, 2024 and sell it today you would earn a total of  100.00  from holding First Trust Energy or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Trust Energy  vs.  BlackRock Capital Allocation

First Trust Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Energy has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable forward indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

BlackRock Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Capital Allocation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BlackRock Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and BlackRock Capital

The main advantage of trading using opposite First Trust and BlackRock Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BlackRock Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BlackRock Capital will offset losses from the drop in BlackRock Capital's long position.

The idea behind First Trust Energy and BlackRock Capital Allocation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.